Poolia AB (publ) (STO:POOL B), is not the largest company out there, but it led the OM gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Poolia’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Poolia
What's the opportunity in Poolia?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Poolia’s ratio of 71x is above its peer average of 29.31x, which suggests the stock is trading at a higher price compared to the Professional Services industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Poolia’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Poolia?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Poolia's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in POOL B’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe POOL B should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on POOL B for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for POOL B, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Poolia, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Poolia has 4 warning signs and it would be unwise to ignore these.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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About OM:PION B
PION Group
Operates as a staffing and recruitment company in Sweden, Finland, and Norway.
Flawless balance sheet and good value.
